Despite what you might read online, there are no magic formulas to how much life insurance you might need. There are basically two methods of figuring out what works best for you.
The first approach to deciding how much insurance you need does not start with the question of “how much insurance do I need.” This approach asks the question “how much life insurance do I want.” Meaning, if cost was not an issue, what amount of money would you want to leave your family? Are you the type of person who thinks your spouse will probably get remarried and you don’t want to leave too much money, or are you the type to want to leave your family as much as possible. Is it important to you for your family to maintain their current lifestyle, or are you ok with the possibility of them having to downsize the home? If you are the type of person who wants to leave your family as much as possible, and for them to never have to worry about financial issues, then the question you should ask is how much life insurance do I want, and start there.
Another view of life insurance or the more traditional view is how much life insurance do I need? Again, a magic formula doesn’t exist if you choose this approach. The amount you need depends on several factors. How much of your income does the family need?. How much debt do you have? Will the mortgage be paid off in 10 years or 30 years? How many kids do you have? Do you want there to be money for them to go to college included in the death benefit? The amount of insurance you need depends on the answers to these questions. When you speak to us at ChooseTerm, we will help you figure out what number is right for you and your family.
After determining how much life insurance you might need or want, cost of life insurance is considered. Based on how much you want to allocate towards insurance, will help determine the type of policy you should have. Your family situation will also dictate the type of policy you should buy. For example if you have little kids, and you need a large amount of coverage, then getting a substantial 20 or 30 year term policy might be the answer for you. If on the other hand you want insurance that will last your entire life then you can explore permanent coverage, or a combination of term and permanent coverage. The last thing you want to do when allocating a monthly or annual budget for life insurance is over extend yourself. You want to make sure that you purchase a policy you can afford that you won’t stop paying for in the future.
Speaking with an independent agent, like ChooseTerm.com allows you to get advice on which type of insurance is best suited for you and your family and how much you should get. We can help shop the market for the best term rates, as well as options for permanent life insurance coverage. We’re knowledgeable on matching your specific situation and any health conditions you might have with the right life insurance company. You can also use this calculator to help you figure out the right amount of coverage for your family. Then fill out our quote form, or call us to get a quote today.
Author: Liran Hirschkorn